Head to Head Review: Eastern (NASDAQ:EML) versus Freightcar America (NASDAQ:RAIL)

Eastern (NASDAQ:EML) and Freightcar America (NASDAQ:RAIL) are both small-cap industrials companies, but which is the better stock? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, valuation, risk, profitability and institutional ownership.

Earnings and Valuation

This table compares Eastern and Freightcar America”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Eastern	$248.97 million	0.58	$7.13 million	$1.34	18.04
Freightcar America	$463.52 million	0.28	$38.10 million	($0.54)	-7.43

Freightcar America has higher revenue and earnings than Eastern. Freightcar America is trading at a lower price-to-earnings ratio than Eastern, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Eastern and Freightcar America’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Eastern	3.44%	3.38%	1.89%
Freightcar America	-2.69%	-15.23%	2.90%

Volatility and Risk

Eastern has a beta of 0.87, meaning that its stock price is 13% less volatile than the S&P 500. Comparatively, Freightcar America has a beta of 1.42, meaning that its stock price is 42% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Eastern and Freightcar America, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Eastern	0	2	0	0	2.00
Freightcar America	1	1	0	0	1.50

Insider and Institutional Ownership

77.0% of Eastern shares are held by institutional investors. Comparatively, 32.0% of Freightcar America shares are held by institutional investors. 18.4% of Eastern shares are held by insiders. Comparatively, 29.2% of Freightcar America shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

Eastern pays an annual dividend of $0.44 per share and has a dividend yield of 1.8%. Freightcar America pays an annual dividend of $0.36 per share and has a dividend yield of 9.0%. Eastern pays out 32.8% of its earnings in the form of a dividend. Freightcar America pays out -66.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Freightcar America is clearly the better dividend stock, given its higher yield and lower payout ratio.

About Eastern

The Eastern Company designs, manufactures, and sells engineered solutions to industrial markets in the United States and internationally. The company offers turnkey returnable packaging solutions, which are used in the assembly processes of vehicles, aircraft, and durable goods, as well as in production processes of plastic packaging products, packaged consumer goods, and pharmaceuticals; designs and manufactures blow mold tools and injection blow mold tooling products, and 2-step stretch blow molds and related components for the stretch blow molding industry; and supplies blow molds and change parts to the food, beverage, healthcare, and chemical industries. It also provides rotary latches, compression latches, draw latches, hinges, camlocks, key switches, padlocks, and handles; and development and program management services for custom electromechanical and mechanical systems for original equipment manufacturers (OEMs) and customer applications. In addition, the company designs and manufactures proprietary vision technology for OEMs and aftermarket applications, as well as offers aftermarket components to the heavy- and medium-duty truck, motorhome, and bus markets. The Eastern Company was founded in 1858 and is based in Shelton, Connecticut.

About Freightcar America

FreightCar America, Inc., through its subsidiaries, engages in design, manufacture, and sale of railcars and railcar components for the transportation of bulk commodities and containerized freight products in the United States and Mexico. It operates in two segments, Manufacturing and Parts. The company offers a range of railcars, including open top hoppers, mill gondola cars, intermodal and non-intermodal flat cars, coal cars; bulk commodity cars covered hopper cars, coil steel cars, boxcars, woodchip hoppers, aluminum vehicle carriers, and articulated bulk container railcars. It also sells used railcars; rebuilds, converts, and leases railcars; and sells forged, cast, and fabricated parts for various railcars. The company's customers primarily include shippers, railroads, and financial institutions. FreightCar America, Inc. was founded in 1901 and is headquartered in Chicago, Illinois.